Critical Points to Remember When Availing a Mortgage Loan Against Property
Loan against property is a mortgage advance that various financial institutions provide against a residential or commercial property as security. These are often high-value advances, thus creating critical financial responsibility on the borrower. A mortgage loan against property also comes with zero restriction to end-use, making it suitable for financing various funding needs, both personal and professional.The financing option also comes with benefits like reduced interest rates as against unsecured loans, continued property ownership, etc. It is also available for both salaried and self-employed individuals. Nevertheless, as the advance creates a long-term financial commitment, it is essential that you are well-informed before applying. Given below are some of the important points you must know about a loan against property. 5 Things to know about loan against property Repayment liability As long-term advances, mortgage loans against property are repayable over a tenure extending up to 15 years. Nevertheless, given the high financing quantum it comes with, the repayment liability, ie, EMIs payable, can also be significant. Thus, one must take care to choose a suitable loan tenure that keeps the EMIs affordable and easily payable as per their repayment capacity. It is best to use financial tools like EMI calculator to assess EMI suitability and thus decide on the loan tenure. 2. LTV and property valuation LTV or loan to value ratio is a proportionate value that determines the maximum loan amount a lender can extend to the applicant as a loan against property. It is expressed as the maximum percentage of the property's current market value and is determined based on multiple risk factors. LTV for loans against property can go up to 75%, enabling high-value financing. You must thus make sure to know the current valuation of your property before applying. Also, factors like property's age, locality, amenities, etc. affect its valuation, thus determining the LTV. 3. Property ownership To offer a property as collateral for availing a mortgage loan against property, the applicant must have a clear title to it. As both residential and commercial properties are eligible as a mortgage, make sure that your ownership over such property is clear from any encumbrance or third-party claim. In the case of a joint application, applicants must also be property co-owners and meet all lender requirements. 4. Eligibility and document requirements While some of the best lenders extend loans against property of up to Rs.15 crore, the applicant must fulfill the minimum eligibility requirement to avail financing. The standard eligibility requirements include - • Minimum 25 years of age • A business vintage of at least 3 years • Applicant must be either a business entity or a self-employed professional Also, make sure to provide the necessary documents backing your eligibility for easy loan processing. 5. Interest rates and other charges Due to their high-value financing and a long tenure involved, an interest rate difference of even a point percentage can significantly affect the interest liability. It is thus crucial to run a market comparison to arrive at the best rates. Also, check and compare other charges to ensure affordable repayment of your mortgage loan against property . Some of the best lenders also provide balance transfer facility at attractive rates to enable existing loan against property borrowers to benefit from declining market rates. Also, remember to check other features like tenure flexibility, accelerated savings, etc. for maximized benefits. Read more - Quick Guide to Mortgage Loans